THE DECLINE OF ECONOMICS

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ABSTRACT: DEPT. OF DISPUTATION about the irrelevance of academic economics… A few weeks ago, the Nobel Prize in Economics was awarded to William Vickrey, an 82-year-old professor at Columbia, and James Mirrlees, a 60-year-old professor at Cambridge. As is often the case with this annual ritual, the newspapers had some difficulty explaining the prize-winning work, which the Nobel committee referred to as “the economic theory of incentives under asymmetric information.” ..But when reporters tracked down Vickrey, an amiable bear of a man, he refused to play along: instead of expanding on the obscure mathematical theory that gained him world attention, he insisted on talking about his practical ideas for reforming the subways, the electoral system, the budget deficit, and much else besides. A “Times” reporter tried to pin him down, but Vickrey quickly dismissed his prize-winning 1961 paper as “one of my digressions into abstract economics.” And he went on to say, “At best, it's of minor significance in terms of human welfare.” Vickrey died just three days after winning the prize, but his last words on his subject should not be forgotten. Here was a world-renowned theorist confirming what many outsiders had long suspected–that a good deal of modern economic theory, even the kind that wins Nobel Prizes, simply doesn't matter much. Economist John Maynard Keynes died in 1946. In the fifty years since his death, economics has been transformed into an abstruse discipline that often appears to resemble a branch of mathematics. Recently, the pace of change has accelerated to such an extent that many economists–particularly middle-aged economists– hardly recognize their own discipline… Economists like Keynes, John Kenneth Galbraith, and Milton Friedman were popular authors, whose ambitious works appeared on the bookshelves (if not the bedside tables) of most concerned citizens. Today, even the most eminent economists are largely unknown outside their field… Mark Dadd, the senior economist at A.T. & T., who is also the chairman of the National Association of Business Economists, told writer, “It's very academic, very mathematical and it really doesn't–I want to choose my words carefully here: it is nothing like as useful to the business community as it could be.” …Economists don't even have an agreed-upon story of how the economy as a whole works… As a result there is now widespread skepticism about the usefulness of ever more complex theories, especially among policymakers… Tells how Keynesian theory collapsed, how the economics theories of Robert Lucas replaced it, but were found wanting, “It's very clear that new classical economics is irrelevant,” Joseph Stiglitz, chairman of the Council of Economic Advisers, told writer. Mentions that most governments still use a modified Keynesian model… Tells about the influence of John Von Neumann's game theory on contemporary economics. Writer interviews Paul Samuelson, and Greg Mankiw… Most economists remain wedded to their elaborate and far-fetched models… One way to encourage economists to become more worldly might be to abolish the Nobel Prize for economics, which since its introduction, in 1969, has helped foster a professional culture that values technical wizardry above all else. Deprived of the publicity surrounding the annual Stockholm ceremony, economists would actually have to do something useful to get noticed. It might take them some time to get there, but in the end the experience would be salutary.